The White House Council of Economic Advisers addressed the possibility of banning antisteering practices, which prohibit insurers from guiding patients to lower-cost providers, in payer-provider contracting. Its conclusion: Prices and premiums could drop.
Along with broader antisteering issues, the memo tackles all-or-nothing contracting, which demands insurers accept all of a system’s hospitals and affiliated physicians — or none at all.
These contracting strategies have been in the spotlight. On June 16, Columbus-based OhioHealth reached an agreement with the Justice Department and the state’s attorney general to end a civil lawsuit that alleged the system used anticompetitive contract provisions to raise costs for patients and employers. Under the agreement, the system did not admit any wrongdoing nor face penalties. In March, the Justice Department filed a similar lawsuit targeting New York City-based NewYork-Presbyterian.
Seven findings:
1. Under an anticompetitive hospital contracting ban, employer-sponsored insurance premiums could drop 6.5% in “directly affected markets.” These savings come out to roughly $1,755 per family and $606 per individual per year.
2. National aggregate premium savings would be around $45 billion each year, which would lead to lower premium contributions and higher take-home wages.
3. Hospital and physician prices could drop 18% in these markets, resulting in about $4,100 in savings per inpatient admission, on average.
4. The memo estimated about 24% of lives covered by employer-sponsored insurance are in markets with binding clauses that could have “measurable effects.”
5. The study estimated a 1% increase in hospital prices is correlated with a 0.4% reduction in nonhealthcare payroll and employment, with unemployment particularly affecting lower- and middle-income workers.
6. Rural residents and independent hospitals may have a lot to gain with an antisteering ban. A ban could lower premiums for rural workers and employers and bolster the negotiating position of independent rural hospitals. Some systems may advocate for these provisions to bring market power to their rural hospitals. But the memo said Sacramento, Calif.-based Sutter Health, which reached an antitrust settlement in 2021, serves as an example of a system with rural operations that thrive even when antisteering and all-or-nothing contracting is off the table.
7. Separately, PwC’s annual medical cost trend report said the group market trend is projected to be 9% in 2027.
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